Inventory accounting
How do you account for unsold inventory in your books?
Unsold inventory should not be treated as an expense yet.
How inventory is handled
- Inventory remains an asset until it’s sold.
- Costs move to expenses only when items are sold.
- Unsold items carry forward to future periods.
Why this matters
Expensing inventory too early can make your business look less profitable than it really is. Tracking what remains unsold keeps reports accurate and meaningful.
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